Why Microsoft is splitting up Windows in its latest reorganization

Connecting the dots: Here are some of the whys and hows around Microsoft's latest reorg -- and especially how it affects Windows and Devices.

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The word is out: Microsoft is embarking on yet another reorg, arguably the biggest since Satya Nadella took over as CEO four years ago. In this one, Windows is going to be cleaved into a couple of parts -- all in the name of making Microsoft over to focus on its high-growth businesses.

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Here's what's happening, as Microsoft's top brass announced March 29:

Microsoft is splitting up its Windows and Devices Group and moving the pieces into two new engineering units: Experiences & Devices under Executive Vice President Rajesh Jha and Cloud + AI under Executive VP Scott Guthrie. A couple of units that are currently part of Microsoft's AI + Research group are going to be moving into Guthrie's new organization. Windows and Devices chief Terry Myerson is leaving the company as part of the reorg.

Microsoft is making these moves because the PC market is no longer growing much, if at all. Its cloud and subscription businesses are growing, however.

Now, some of the company's recent strategy moves make more contextual sense. Last year, Microsoft laid the groundwork designed to make Windows part of a recurring subscription business via Microsoft 365, which is a bundle of Windows 10, Office 365, and elements of the Enterprise Security + Mobility service. It's also why Microsoft began designing products in a way that brought its Surface hardware, Office software, and Windows operating system together, rather than in their own respective silos.

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Microsoft is hoping it can do with Windows what it did with Office. The company managed to turn its individual on-premises Office products into a cloud bundle with Office 365 -- which is growing even faster than Microsoft itself expected. (Microsoft officials have predicted the company could have two-thirds of its Office users in the cloud by its fiscal 2019.) Now, it's trying to do something similar for Windows with Microsoft 365: Create a bundle of cloud services anchored by Windows 10 that will provide the company with a recurring revenue stream.

With today's moves, Microsoft is not throwing in the towel on Windows or its Surface line.

Panos Panay gets a new title -- chief product officer -- and still heads up devices. Joe Belfiore is leading the "Windows client experience," meaning the shell and cross-device experiences like Edge and Launcher. Kudo Tsunoda is continuing to spearhead the NEXT (New Experiences and Technology) business, which had its own reorg earlier this year. And Corporate VP Brad Anderson, whose team joined the Windows organization late last year, will continue to run Windows Enterprise Deployment and Management. All of these people will report to Jha.

Microsoft is moving some of Myerson's other former lieutenants to Guthrie's Cloud & AI division. Jason Zander, who is being promoted to executive vice president under Guthrie, will lead the newly combined Azure and Windows platform teams. The thinking is by bringing Windows client, server, and cloud all together, Microsoft will be able to better build a common infrastructure and application model across all flavors of Windows. Roanne Sones, who heads up technical engagement with OEMs and silicon vendors, will also be part of Zander's team.

Technical Fellow Alex Kipman gets a new role as part of today's reorganization, as well. He will continue to work on the HoloLens while also leading a new team called AI Perception & Mixed Reality Services, which will be part of Guthrie's organization. The new team will oversee all Microsoft's speech, vision, mixed reality, and other perception capabilities, and it will continue to build first-party experiences and cloud services for third parties on Azure. Kipman and team will work closely with Harry Shum on all things AI related.

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Outside of Windows and Devices, there are a few other noteworthy org changes revealed today, especially around AI. While Kipman is taking on oversight of "perception"-related AI services, the overall AI Platform, Tools and Cognition Services, including Azure ML, Cognitive Services, and the Bot Framework, will be folded into a new "AI Platform, Tools and Cognitive Services" team under Eric Boyd, as part of Guthrie's organization. Cloud AI Platform Corporate VP Joseph Sirosh will join this new group, as well. (These products/services were, up until now, part of Shum's AI + Research org.)

I'm hearing from my contacts there are not going to be layoffs associated with today's reorg. The moves today also will not change how Microsoft reports its financials.